Memorandum Circular No. 236




MALACAÑAN PALACE MANILA BY THE PRESIDENT OF THE PHILIPPINES [ Memorandum Circular No. 236, February 27, 1969 ] The Secretary of Justice in his memorandum for the Executive Secretary dated October 29, 1968, on the subject: “Legality of city or municipal ordinances imposing taxes and/or fees on passengers and cargoes carried by inter-island ships, such as those of Cebu and Tacloban cities,” holds that, in line with the ruling that the imposition of a fee or tax on departing airline passengers “constitutes an undue restriction on an individual’s fundamental right to travel from one place to another, and for that reason is constitutionally and legally untenable” (Memorandum Circular No. 200 of this Office dated August 7, 1963, entitled: “Holding illegal the imposition of a city or municipal tax or fee on departing Airline Passengers” ordinances imposing taxes and/or fees on passengers carried by inter-island ships suffer from the same infirmity. As regards the validity of the imposition of the tax and/or fee on cargoes transported by inter-island vessels, quoted hereunder are self-explanatory portions of the same memorandum of the Secretary of Justice cited above, to wit: “As regards the tax and/or foe levied on cargoes transported by inter-island vessels, this Office is aware of the decision of the Supreme Court in the case of Min Bay Mining Co. vs. Municipality of Roxas, Palawan, G.R. No. L-20125, prom. July 20, 1965, upholding the legality of a municipal ordinance imposing an inspection and verification fee’ P0.10 per ton of silica and excavated and shipped out of the municipality, and stating that Sections 2287 and 2629 of the Revised Administrative Code which deny to municipal councils the power to impose a tax in any form whatsoever upon goods and merchandise carried out of the municipality,’ have been repealed by Section 2 bf Republic Act No. 2264 which grants to local governments the power to tax everything, excepting those things which are mentioned therein. (Sec also Hodges vs. Hun. Board of Iloilo, G.R. No. L-18271, prom. January 12, 1967.) “Nonetheless, I believe that this ruling is not controlling, or decisive as regards goods in transit or just passing through a city or municipality. Firstly, it bears emphasis that the general authority granted to cities, municipalities and municipal districts is confined to the imposition of municipal license taxes or fees persons engaged in any occupation or business, or exercising, privileged … [and] reasonable fees for services rendered in connection with any business, profession or occupation conducted within the city, municipality or municipal district.’ Thus, in the Win Bay Mining Co. and Hodges cases the ordinances sought to tax, respectively: silica and sand excavated frommines within Roxas, Palawan, and shipped cut of the said municipality; and the sale of real property situated in the City of Iloilo. Both parties contesting the validity of the ordinance in question were doing business within the municipality or city. Secondly, it is a cardinal rule in the law of taxation that the power to tax may be exercised only where the business, occupation, property or transaction has a situs within the territorial jurisdiction of the taxing state or municipal corporation. Goods in transit or merely passing through a city or municipality — i.e., not products of some business conducted within the d municipality which are being shipped cut, articles brought into the said municipality for purposes of sale or use therein — do not acquire such a situs for purpose of local taxation. Those goods are taxable only when the transit terminate, which ordinarily takes place arrival and delivery or storage at the original destination. (See Minnesota v. Blasius, 290 US 1, 78 L. ed. 131; see also 51 Am. Jur. 266.) “Needless “to add, ordinanceswhich seek to tax cargoes or goods in transit are of doubtful validity.” In view of the foregoing, all concerned, particularly local government officials, are hereby enjoined to observe strictly the contents hereof and be guided accordingly.1âшphi1 By authority of the President (SGD.) RAFAEL M. SALAS Executive Secretary Manila, February 27, 1969 The Lawphil Project - Arellano Law Foundation